Hard drive supplies back to pre-flood levels, but prices aren’t

With supplies back on the upswing, HDD prices have found a new, higher normal.

Last October, flooding in Thailand took a huge bite out of hard disk drive supplies, taking out about a quarter of the world's HDD manufacturing capacity. The impact of that disaster has passed, and supply levels are back to near where they were before last October's disaster. But while the flood waters have long since receded, drive prices haven't fallen nearly as much—as InfoWorld's Woody Leonhard reports, retail hard drive prices are still about 75 percent higher than they were before the flood and show no signs of coming down. And the manufacturers are posting healthy profits as a result.

According to IHS iSuppli, the flood severely curtailed shipments of hard drives in the last quarter of 2011, which were down by 29.1 percent from the 174 million sold by the industry from July to September of 2011. By the end of the first quarter of 2012, shipments were just 16.6 percent lower. However, iSuppli reports, "the Average Selling Prices (ASPs) in the post-flood time frame were approximately 28% higher than in the pre-flood period in both quarters."

That's because PC manufacturers, who buy the largest percentage of disk drives, have locked in their prices with long-term contracts, according to Leonhard. And while the HDD manufacturers have dealt with tight supply during rebuilding, they've had fewer drives to sell through other channels—such as retail. That drove the price of drives up initially as much as 300 percent.

The tightening has eased since then. But hard drive manufacturers are still shipping fewer drives. For example, in an earnings call on April 26, Western Digital CEO John Coyne noted that the Thai floods "knocked out almost 90 percent of WD's slider availability and 60 percent of WD drive assembly capacity and a substantial portion of the industry supply chain," but that Western Digital and its partners had "reached the point where we now have the capability to adequately meet anticipated customer demand in the current quarter and beyond." Western Digital shipped 44.2 million hard drives in the first quarter of 2012, and had a record net profit of $483 million—a 16 percent profit margin on its $3.04 billion in sales. Seagate, whose facilities weren't directly impacted by the flood, saw a 25 percent profit margin of $1.146 billion—also a record profit.

Promoted Comments

IMO the best thing that has come from this whole hard drive drought has been the a swifter uptake of SSD drives and the subsequent pricing drops we have recently seen. It's obvious that there is not a direct connection between the lack of mechanical hard drives and the move to SSDs - lower memory prices and number of other factors were involved there. Where it did help where moments when someone needed a replacement drive and could spend a little more (or less) for a SSD and get acceptable capacities - most people don't need a laptop with a 500GB drive (I said 'most').

The demand for SSDs have surely affected the increase in supply and lower cost. At this point, I would say that except for OEM's and larger hard drives, mechanical drives as a primary drive are hopefully on their way out. This arena seems to currently belong to Crucial, Samsung and some other major players - Seagate and WD will need to get their act together, expand their product portfolio and bring pricing down to remain competitive in the consumer space (enterprise is a different beast). The 2TB+ market is where most people are watching for decreases, however I'm sure the era of $60 2TB drive is over - for now.

Sean Gallagher
Sean is Ars Technica's IT and National Security Editor. A former Navy officer, systems administrator, and network systems integrator with 20 years of IT journalism experience, he lives and works in Baltimore, Maryland. Emailsean.gallagher@arstechnica.com//Twitter@thepacketrat

97 Reader Comments

I've been delaying my normal hard drive upgrade cycle because of the price hikes. Whenever 3TB drives come down to $100-120 is when I'll finally upgrade my old drives. I'm assuming plenty of other people are doing the same, waiting for a certain capacity to get to a certain price before they buy.

So much for supply and demand, or maybe we just need to wait a little longer. Bare 7200-RPM 3.5" 1TB SATA HDDs were retailing for $49-59 at local computer part distributor outlets here, last year before the flood. Now similar or identical models (e.g.: Seagate Barracuda) are listing for $95 or more, nearly $0.10 per GB. The picture isn't quite so bleak with large capacity, but it's still a far cry from the $0.05/GB we were seeing before the flooding disrupted the storage sector supply-side. I'll keep waiting, I'm not going to upgrade my home RAID storage server until the prices become competitive again.

The flooding didn't actually affect production. Did you see an actual lack of hard drives anywhere? Were they unavailable anywhere? No. They just cost $250 apiece, you could still buy as many as you wanted.

It was just an excuse to force hard drives back into a higher profit margin. Hilariously pointless though since you can get a good-sized SSD (128 GB) for the price of a 1 TB hard drive now.

Give it time. This is like gas prices, they shoot up the very instant the first tweet appears about possible unrest in the middle east or refinery problems in Russia, but they come down only very slowly as the companies enjoy their heavy profits. Eventually one will undercut the other, and the other retaliates, and the prices get back to where everybody is running on thin margins again.

Either that or Seagate uses its windfall cash to buy up WD and become a de-facto monopoly so it can keep prices high forever, or at least until some Chinese firm starts up and undercuts them.

Meh, any time a corporation finds a way to reduce product costs while keeping the retail price high they will cling to it as long as possible.

It's as if the last holdouts are in collusion to keep prices high, but with so few players, no meeting of the minds is even necessary. Also, you'll see that warranties on new drives are lower than they've ever been before. While 3 - 5 years used to be the standard warranty you'd get on any hard drive, that is down to 1 - 3 years now, with the 5 year warranties reserved only for the most expensive drives.

Bad news all around for those of us who enjoy having access to cheap storage. Not sure if I'll ever be able to buy $60 2TB drives like I did last year.

So this is how the market works.... Companies don't just sell stuff for a percentage of what it costs to make, they sell things for as much as they can. So right now the prices have not come down as much as they were... But the fact that people are waiting means they will come down. right you wouldn't expect the price to be right in line with supply, you'd expect them to get what they can, while they can get it.

It seems like they're using it to push SSD sales. Those seem to have come down a little bit but spinning drives are still ridiculous. I paid $75 for a 1TB Seagate Barracuda @ Best Buy right after the floods hit and that was after tax. Same one new is going for $99 + $7.86 s&h on new egg. I'm not saying they should go down to exactly what they were but the manufacturers are pulling a shady move like the oil companies did....one little scare or event drives prices up and they like that so they refuse to lower them and justify the continued hike.

So this is how the market works.... Companies don't just sell stuff for a percentage of what it costs to make, they sell things for as much as they can. So right now the prices have not come down as much as they were... But the fact that people are waiting means they will come down. right you wouldn't expect the price to be right in line with supply, you'd expect them to get what they can, while they can get it.

The flooding didn't actually affect production. Did you see an actual lack of hard drives anywhere? Were they unavailable anywhere? No. They just cost $250 apiece, you could still buy as many as you wanted.

Yes it did. Yes I did. Yes. Yes, and no you couldn't.

The market regulated demand by increasing the prices so that the lowered output could keep up.

---

You added something about SSDs costing 10 times as much as spinning platter drives per GB which in bizzarro world is cheaper, somehow. But no it actually isn't. Beyond your OS and installed software, SSDs doesn't offer any advantages for most people, they're just smaller.

That's why most normal people go for an SSD + a large HD.

Also a lot of the worlds storage aren't used by normal computer users.

The flooding didn't actually affect production. Did you see an actual lack of hard drives anywhere? Were they unavailable anywhere? No. They just cost $250 apiece, you could still buy as many as you wanted.

It was just an excuse to force hard drives back into a higher profit margin. Hilariously pointless though since you can get a good-sized SSD (128 GB) for the price of a 1 TB hard drive now.

Maybe you've never studied market economies, but when the prices just but 200% to 300%, *MOST* people stop buying the product and wait, which means the high rollers like yourself can buy as many as you want, because no one else is buying them.

It affected production and anyone who says otherwise may as well say we never landed on the moon.

IMO the best thing that has come from this whole hard drive drought has been the a swifter uptake of SSD drives and the subsequent pricing drops we have recently seen. It's obvious that there is not a direct connection between the lack of mechanical hard drives and the move to SSDs - lower memory prices and number of other factors were involved there. Where it did help where moments when someone needed a replacement drive and could spend a little more (or less) for a SSD and get acceptable capacities - most people don't need a laptop with a 500GB drive (I said 'most').

The demand for SSDs have surely affected the increase in supply and lower cost. At this point, I would say that except for OEM's and larger hard drives, mechanical drives as a primary drive are hopefully on their way out. This arena seems to currently belong to Crucial, Samsung and some other major players - Seagate and WD will need to get their act together, expand their product portfolio and bring pricing down to remain competitive in the consumer space (enterprise is a different beast). The 2TB+ market is where most people are watching for decreases, however I'm sure the era of $60 2TB drive is over - for now.

They're making hay while the sun shines. How long before SSD's are the norm in consumer PC's, not the exception? I give it another two maybe three years. Talk about dead men walking! If I owned a piece of Seagate I'd sure hope they have a killer business transformation plan.

I can't say I'm surprised. I'm sure there is a component of the demand still being high relative to supply because a lot of people put off buying new HD's after the price spike and there still not being as many drives piling up in the supply chain but I still believe that the HD companies are just enjoying the better margins they have now and aren't in a hurry to undercut each other back down to the pre-flood prices. Sure, it will happen but it will probably take another year or 2 for that to happen.

The need for data is constantly growing, and SSD's are still multiple times more expensive per GB than platter drives, and have their own growing pains. No one is buying them for storage, nor should they.

It will be nice when they're the norm, but Joe Consumer is going to balk when seeing new PC's offered with a 128GB drive when the one he's replacing had 320GB, and he has 200GB of data to store. He's not going to care that the drive is faster. Even as SSD prices fall, it will be quite a while before they can realistically compete with platter drives on the consumer market, and enterprise will be sticking with platters for large data for quite a while.

The flooding didn't actually affect production. Did you see an actual lack of hard drives anywhere? Were they unavailable anywhere? No. They just cost $250 apiece, you could still buy as many as you wanted.

Yes it did. Yes I did. Yes. Yes, and no you couldn't.

The market regulated demand by increasing the prices so that the lowered output could keep up.

---

You added something about SSDs costing 10 times as much as spinning platter drives per GB which in bizzarro world is cheaper, somehow. But no it actually isn't. Beyond your OS and installed software, SSDs doesn't offer any advantages for most people, they're just smaller.

That's why most normal people go for an SSD + a large HD.

Also a lot of the worlds storage aren't used by normal computer users.

A voice of reason in a sea of uninformed ignorance. Lovely post. Thank you for saying what I came here to say.

Yes. And both are intolerably anemic when it comes to storage. This is especially true for the devices that can't be upgraded by the end user. Apple devices are nice and shiny but everyone want's the ugly device with the 500G HDD once the network starts to flake out.

SSD has quite a ways to go before it's price competitive for any general purpose platform.

I assume its because people are catching up on HDD purchases. Supply might be back to where it was but there is a large pool of unmet demand for the last 6-9 months. I'm waiting for 2TB drives to breach $100 again, but I don't expect it to be until much later this year (I need one last drive to provide enough space for my WHS box, before its eventually replaced with some ZFS pool hanging off the back of a Mac Mini).

The flooding didn't actually affect production. Did you see an actual lack of hard drives anywhere? Were they unavailable anywhere? No. They just cost $250 apiece, you could still buy as many as you wanted.

It was just an excuse to force hard drives back into a higher profit margin. Hilariously pointless though since you can get a good-sized SSD (128 GB) for the price of a 1 TB hard drive now.

Maybe you've never studied market economies, but when the prices just but 200% to 300%, *MOST* people stop buying the product and wait, which means the high rollers like yourself can buy as many as you want, because no one else is buying them.

It affected production and anyone who says otherwise may as well say we never landed on the moon.

Exactly. I had planned to grow the RAID in my media storage box by another 2TB right when the floods hit. Now not only did that not happen, but I've got a drive on the verge of failure and I haven't gotten to replacing it because I'm hoping prices come down first.

Increased price lowers demand, preventing shortage. That's not just Econ 101, that's like the first week of Econ 101.

Just digging their own graves. Each month SSD prices drop further, and every cent per GB erased from the difference between SSD and HD prices means new SSD customers.

When the price ratio gets to be less than 2:1, no one but cheap companies and $300 Wal-Mart PC buyers will buy HDs anymore.

I won't anytime soon. I don't like trusting data to a device that can die with zero notice. With mechanical drives you can start to tell when a drive is beginning to go. Even with backups that kind of random failure can screw things up for at least a couple hours if not more.

However, iSuppli reports, "the Average Selling Prices (ASPs) in the post-flood time frame were approximately 28% higher than in the pre-flood period in both quarters."

That's because PC manufacturers, who buy the largest percentage of disk drives, have locked in their prices with long-term contracts, according to Leonhard.

Can someone help me with this? In the first paragraph, based on how I'm reading it, it seems to state that a manufacturer like Dell (for example) would not have seen an increase in HDD prices since they lock-in pricing via contract, floods or Acts of Dog be damned.

Why then, were Dell's (using the example) HDD prices increased to reflect the market hike if they weren't affected by the price hike?

It's price fixing, plain and simple. The silly part is that it's going to hurt them over the long haul as consumers migrate to SSD fro HDD. Suck up your profits now because you won't see them again in the future.

The whole drive shortage thing completely messed up my storage plans. I was hoping to replace a ~1.8 RAID of 640GB drives this year, but instead my spare would sell for more than it cost new, and I can't afford to move to an array of 2 or 3 gig drives for the forseable future...

Combined with the random assortment of off-capacity drives I have it's enough to almost make a drobo look appealing.

Especially when all the makers are more than happy to not compete on price.

However, iSuppli reports, "the Average Selling Prices (ASPs) in the post-flood time frame were approximately 28% higher than in the pre-flood period in both quarters."

That's because PC manufacturers, who buy the largest percentage of disk drives, have locked in their prices with long-term contracts, according to Leonhard.

Can someone help me with this? In the first paragraph, based on how I'm reading it, it seems to state that a manufacturer like Dell (for example) would not have seen an increase in HDD prices since they lock-in pricing via contract, floods or Acts of Dog be damned.

Why then, were Dell's (using the example) HDD prices increased to reflect the market hike if they weren't affected by the price hike?

Some contracts may have expired. Also, if you mean Dell's prices in-store then of course they're going to raise prices to reflect the market reality outside their store, if they can get away with it. Regardless of whether their costs went up.

They're making hay while the sun shines. How long before SSD's are the norm in consumer PC's, not the exception? I give it another two maybe three years. Talk about dead men walking! If I owned a piece of Seagate I'd sure hope they have a killer business transformation plan.

Straight up SSDs will probably never become the norm for consumer PCs. Unless some game changing technology comes along, flash has too many drawbacks to completely overtake magnetic spinning media. The future will probably be mostly hybrid drives, like the Seagate Momentus XT.

A couple points to keep in mind when it comes to flash:

Reads on flash are extremely fast, but the writes are less so. The latest HDDs are competitive with all but the highest performing SSDs when it comes to sequential writes.

As an SSD starts filling up, its write performance tends to tank. Most of them become slower than a conventional HDD on even random write workloads.

As the feature size of the flash gets smaller, the number of write/erase cycles a cell can go through decreases. The current write/erase count at the 24 nm process is about 3,000. At 16 nm the count will be closer to 1,500. This means that the cheaper SSDs get (and as they start to increase in capacity), the less reliable/shorter lived they will be.

Flash will probably never be competitive with spinning media on a $/GB basis simply because it takes more atoms to store a bit in flash than it does in magnetic spinning media. This isn't an issue right now, but eventually we will hit a wall on storage density for both solid state and magnetic disk. Solid state's theoretical wall is lower than magnetic media's.

However, iSuppli reports, "the Average Selling Prices (ASPs) in the post-flood time frame were approximately 28% higher than in the pre-flood period in both quarters."

That's because PC manufacturers, who buy the largest percentage of disk drives, have locked in their prices with long-term contracts, according to Leonhard.

Can someone help me with this? In the first paragraph, based on how I'm reading it, it seems to state that a manufacturer like Dell (for example) would not have seen an increase in HDD prices since they lock-in pricing via contract, floods or Acts of Dog be damned.

Why then, were Dell's (using the example) HDD prices increased to reflect the market hike if they weren't affected by the price hike?

If the consumer market has prices go up, then Dell can make a profit on the difference between their locked in contract price and the consumer price. Only they can probably charge more than consumer price for upgrading storage beyond their configuration default because system configuration is a process intended to make pricing opaque, especially to non-technically inclined consumers....

"+90 $ for an extra 500 gigs? What a great deal! A new 1.5 TB drive is $110, so it makes sense to upgrade 'cause I'll save $20," is what lots of rather sad consumers probably think, and even if they don't, and realize that the price includes the original drive's cost plus the $90 upgrade cost, most probably won't even care.

In any case, seller will always take as much as they can get. Nobody caps their own profits unless it's part of a strategy to kill off their competitors or something.